More Mass. residents lack rainy-day funds
Feb 12, 2012
One in four Bay State households lacks the savings or other assets necessary to survive financially for three months in the event of a job loss or other emergency leading to reduced income, according to a new national poverty ranking.
While Massachusetts is ahead of 40 states and the District of Columbia when it comes to the financial stability of its residents, 26 percent of households have little or no financial cushion to rely on in case of crisis, the “2012 Assets & Opportunity Scorecard” states.
The scorecard, issued by the Corporation for Enterprise Development, finds nearly 35 percent of local households are “liquid asset poor,” meaning they don’t have cash on hand or quickly convertible assets to live at the national poverty level for three months.
“For many people, the American Dream is purchasing that home or being able to send their kids to college. Those are the assets people are shooting for, and it’s really hard to get to those without having that initial start of savings,” said Kasey Weidrich, the Washington, D.C.-based nonprofit group’s senior program manager for applied research. “Income helps you get by for today, it doesn’t help you get through tomorrow.”
High credit debt, poor credit scores and a relative lack of homeownership are also contributors to the state’s stark financial forecast. With an average credit card debt of $12,637, only six states fare worse than Massachusetts, while 46 percent of local consumers have subprime credit, according to the report.
The scorecard assesses all 50 states and the District of Columbia on 101 outcome and policy measures grouped into five issue areas. The Bay State, which has a 12 percent income poverty rate and slipped one notch from the nonprofit’s 2009 poverty scorecard, received an “F” for housing and homeownership as only five states fared worse in terms of the rate of homeownership.
Vermont took the top spot for residents’ financial security.
Secretary of Housing and Economic Development Greg Bialecki said Massachusetts’ housing market stability, banking sector strength, and government financial status were in good shape, and that the state’s poverty statistics were “indicative of the country as a whole.”
“Despite our progress in job gains, we really can’t be satisfied with our progress as long as we know there are a number of people that still are not where they need to be to take care of themselves and their families,” Bialecki said. “There’s no question there’s a large number of people who are still feeling insecure about their financial futures and ... part of our job is, ‘What can we do to make sure that Massachusetts’ economy is creating opportunity for all of them?’ ”
Local economists described the state’s poverty statistics as both striking and unsurprising thanks to the recession and housing crisis.
“If the nation didn’t have any of those, all states would be doing better on these measures,” Northeastern University economist Alan Clayton-Matthews said. “It’s not surprising when you think about it.”
Clayton-Matthews said the state essentially has two economies — one geared toward the highly educated with professional jobs in the technology and knowledge-based sectors, and the other focused on those working in sectors hit hard by the recession, including construction, manufacturing and retail trade.
“If you were to ask households that live ... in Lowell, New Bedford, Fall River, those other communities, this would not be a surprise to them,” he said.
Michael Goodman, a University of Massachusetts at Dartmouth public policy professor, said most households view their home as their largest asset.
“When the value of the asset declines, that household ‘wealth’ declines as well,” Goodman said.
Goodman added the state’s financial security could be better ensured with better jobs, and more affordable housing and education opportunities.
“That’s easy to say, hard to do,” he said. “But I don’t think there’s any substitute for those things.”